KUALA LUMPUR (June 22): Italy's largest insurer Generali is proposing to buy a 70% stake in AXA Affin Life Insurance (AALI), a 53% stake in AXA Affin General Insurance (AAGI), as well as enlarge its current stake in MPI Generali Insurance Bhd from 49% currently to 100%.
In a statement, Generali said it will acquire a 49% stake currently held by AXA and a 21% stake currently held by Affin Bank Bhd in AALI, while it will purchase a 49.99% stake in AAGI from AXA and a further 3% stake from Affin and minority shareholders.
Generali also plans to buy its joint-venture partner Multi-Purpose Capital Holdings Bhd (MPCHB) out of MPI Generali Insurance.
The total consideration for the combined transactions is RM1.29 billion subject to closing adjustments, said Generali in a statement.
As a result of the transactions, Generali will operate in Malaysia through two companies — one in the property and casualty (P&C) segment and the other in the life segment.
In the P&C segment, Generali said both AAGI and MPI Generali will be merged following the transactions, creating one of Malaysia's leading general insurance operations, with Generali holding a 70% stake while Affin Bank will hold the remaining 30%.
"The acquisitions will position Generali as one of the leading insurers in the Malaysian market, creating the second largest P&C insurer by market share and entering the country's life insurance segment," Generali added.
Generali said it has submitted an application to the local regulator in order to acquire the remaining shares of MPI Generali Insurance held by MPCHB. The transactions are subject to the approvals of the Minister of Finance and Bank Negara Malaysia (BNM).
Generali will also enter into an exclusive bancassurance agreement with Affin Bank for the sale of conventional P&C and life insurance products.
"Generali, AXA, Affin Bank and MPHB Capital are working together to obtain the required regulatory approvals. Generali will commence the necessary integration planning to develop an organisation that leverages the skills, experience and expertise of all the staff of the combined business," it added.
The transactions are expected to be concluded in the second quarter of 2022.
HSBC is acting as exclusive financial adviser to Generali on the transactions. Law firm Wong & Partners is acting as legal adviser.
Jaime Anchústegui Melgarejo, chief executive officer international of Generali Group, said the transactions are fully aligned with Generali's strategy to strengthen its leadership position in high potential markets like Malaysia, which represents a very attractive opportunity as it is home to a growing middle-class population and with an insurance penetration rate that is still relatively low compared to other more mature markets in the Asian region.
Meanwhile, Generali Asia's regional officer Rob Leonardi said this is an exciting time for Generali in Malaysia and for the group's growth strategy in Asia.
"Over the last five years we have enjoyed working together with our business partner to reshape MPI Generali and now we can further optimise our strategic position, secure economies of scale for more efficient operations and deliver even greater value for our customers. We have ambitions to further transform and strengthen our business in this important market and look forward to working with our customers, employees, agents, partners and distributors on this journey," Leonardi added.
Generali has been active in Malaysia since 2015, when it acquired a 49% stake in Multi-Purpose Insurans Bhd — a P&C insurance subsidiary of MPCHB to create MPI Generali.
MPCHB is a wholly-owned subsidiary of MPHB Capital Bhd.
To recap, MPHB Capital announced on Bursa Malaysia in August last year that it was seeking BNM's green light to start talks with Generali Asia on the divestment of its 51% stake in MPI Generali.
In a separate statement, Affin Bank Bhd president and group CEO Datuk Wan Razly Abdullah Wan Ali said he is looking forward to growing businesses together with Generali.
“As shareholder of both the insurance entities, we hope to create synergistic growth opportunities for AAGI and AALI and reinforce our commitment to offering holistic financial solutions to our customers and enhance the overall customer experience through the future bancassurance partnership with Generali,” he commented on the group’s partnership with Generali.
Affin currently owns 51% in AALI and 49.95% in AAGI. Upon completion of the transaction, Affin’s eventual shareholding in both AALI and AAGI (MergeCo) will be reduced to 30%.
Affin said the entry of Generali as the new major shareholder of AALI and AAGI (MergeCo) will enable the group to monetise part of its investments in the insurance businesses, the proceeds of which will be reallocated to fund business growth in its core banking business.
“From the AAGI merger, there will be enhanced brand equity for Affin via ownership of a larger scale general insurer in Malaysia which is expected to be the second biggest general insurance provider with an estimated gross written premium (GWP) of more than RM2 billion and total assets of more than RM6 billion,” it added.
Affin believes that with the new partnership with Generali, being one of the largest global insurance groups, both insurance entities will be poised to scale greater heights.
Affin shares closed up two sen or 1.18% to RM1.72, valuing it at a market capitalisation of RM3.65 billion.
MPHB Capital's share price added 14 sen or 8.92% to settle at its more than four-year high of RM1.71, for a market capitalisation of RM1.22 billion.